Urea

Urea prices moved down worldwide this week, reacting to the weakness in FOB levels in the Black Sea. Small sales took place this week at $235-238/tonne FOB Yuzhny. Traders were bidding lower, convinced that production in Ukraine will rise in September when lower gas prices take effect.

Demand was low in the west as buyers stepped back and try to time their re-entry to coincide with the bottom of the market. Some short selling was taking place, notably in Turkey, at prices equating to the low-$230s/tonne FOB Yuzhny.

The drop in prices will stimulate demand in due course. The main potential markets besides Turkey were India and Brazil. Price ideas in both countries fell to the low-$270s/tonne CFR, implying prices of $230-235/tonne FOB Yuzhny before margins.

In Ukraine, urea prices dropped into the $230s/tonne FOB Yuzhny this week in limited trading.


Helm bought 5,000-10,000 tonnes of urea at $238/tonne FOB Yuzhny for prompt shipment, thought to be to cover sales in Turkey. Subsequently a trader bought another small parcel at $235/tonne FOB, also for prompt shipment.

Ukrainian producers rejected bids at $230/tonne FOB for September, but will come under increasing pressure to sell. There were around 84,000 tonnes of urea in store at OPZ at present. The line up for September was minimal at 28,000 tonnes. Production will rise in September. Gorlovka was still planning to resume production on one prilled urea line. Cherkassy was considering whether to restart its second line. Sevdon was expected to resume production after turnaround.

The floor price in Yuzhny remained to be seen. Estimates of the reduction in natural gas prices varied, but it appeared ammonia/urea producers in Ukraine will pay around $225/’000cbm delivered for gas in September. On this basis, the breakeven cost would be close to $220/tonne.


In Romania, Interagro sold 6,000 tonnes of urea for prompt shipment to Turkey based on prices close to $260/tonne FOB. Price ideas for September were in the high-$250s/tonne FOB for markets in which Romanian urea had a duty advantage.